Amazon threat to retailers overblown

The SME community has less to fear from Amazon’s entry into the local market than many believe, as hype about the global marketplace blurs the lines between truth and speculation.

That is the view suggested by Russell Zimmerman, executive director of the Australian Retailers Association (ARA).

Speaking with My Business just after Amazon unveiled the location for its first Australian distribution centre, Mr Zimmerman, urged business owners to be measured in their response, and offered these tips for amending existing business plans to factor in an Amazon marketplace:

1. Don’t do nothing

The first piece of advice is by far the simplest – don’t sit idle.

“Don’t stick your head in the sand, because it will happen,” says Mr Zimmerman.

Instead, take a realistic look at both the threats and opportunities that Amazon’s launch presents to your business. This will provide scope to actively mitigate the risks, and embrace the potential for growth.

2. Keep Amazon in context

At the end of the day, Amazon is simply another business – and impending forecasts of doom for local retailers and businesses ignore the fact that change has always been a factor in the world of business.

“If you go back, [there a lot of high-profile retailers] that have gone out of business long before online was here in Australia,” notes Mr Zimmerman.

“Retail has changed forever – it has always been changing, and it will continue to change. And so the retailers that are smart retailers, that are looking forward and working out their plans, building their unique customer proposition, seeking brands … to move forward, getting everything lined up, are the retailers that will succeed.”

3. Play up your USP

Playing up your unique selling points and the factors that differentiate your products from those found elsewhere has never been a more useful strategy than in an Amazon world, suggests Mr Zimmerman.

“If you are a smaller product with a unique product offering, then I think there is a huge opportunity on Amazon. And there are plenty of small retailers that have their own branded products,” he says.

“If you’re in Newcastle, even if you’re online, it may be very hard to find that product; but if you then put that on Amazon, you are opening yourself to a far greater market, maybe in Australia or maybe throughout the world.”

For more traditional businesses onselling other products, that USP will most likely come down to your service offering.

“I think if you are a small independent retailer and you are selling what I would call traditional brands – so if you’re a dress shop and you are selling brands that are available in any kind of shop at all – I think it will be much harder; your unique difference will have to be something that you do that offers to the marketplace, either as a bricks and mortar retailer or as an online retailer, something that is unique,” says Mr Zimmerman.

4. Don’t believe all the hype

What has many business owners spooked is the reported claim that Amazon is aiming to slash Australian retail prices by 30 per cent.

Yet Mr Zimmerman cautions this is likely to be more fiction than fact, and as such, should not be given too much credence.

“I think that [Amazon] will have challenges as they move forward, and I don’t know whether the cost of business that they talk about – this 30 per cent – whether that is achievable when you work out what the costs of doing business in Australia are,” he says.

“Wages in the US sit at around, about $8 to $10 in the retail industry ... wages here in Australia, in approximate terms, are about $20 an hour. The cost of building a retail premises in the US is certainly around 30 and maybe up to 50 per cent less in the US than it is in Australia. Transport: I think the tyranny of distance will be another issue for them.

“You’ve got to remember that in the US, you talk about a small town; it might have 50,000 people in it. A small town in Australia might have 50 people in it. I think they’ve got to come to grips with all that; I don’t know whether [they] have really [gotten] to grips with all that.”

5. Embrace the opportunity for change

Finally, as the old cliché goes, every cloud has a silver lining. As such, it’s important for all Aussie businesses to seek out what opportunities may arise for their business from Amazon’s arrival into the local market.

“Amazon state quite clearly that almost 50 per cent, I think is the wording, of their sales come from retailers. So Amazon have an interest in dealing with retailers; I think that’s fairly reasonable to state,” says Mr Zimmerman.

“Absolutely there’s an opportunity to go and sell through Amazon and get a much broader coverage than what you currently have got.”